Serrano v. Priest

Decision Date30 December 1976
Docket NumberI,AFL-CI
CourtCalifornia Supreme Court
Parties, 557 P.2d 929 John SERRANO, Jr., et al., Plaintiffs and Respondents, v. Ivy Baker PRIEST, * as State Treasurer, etc., et al., Defendants and Appellants, California Federation of Teachers,ntervener and Respondent, Beverly Hills Unified School District et al., Interveners and Appellants. L.A. 30398. In Bank
[557 P.2d 930] John H. Larson, County Counsel, James W. Briggs and Donovan M. Main, Deputy County Counsel, Los Angeles, for defendants and appellants and for interveners and appellants

Ronald A. Zumbrun, John H. Findley, Sacramento, H. LeRoy Cannon, San Francisco, Roger J. Nichols, Leonard Siegel and Nichols & Rose, Los Angeles, as amici curiae on behalf of defendants and appellants and interveners and appellants.

Sidney M. Wolinsky, San Francisco, Daniel M. Luevano, Rosalyn M. Chapman, John E. McDermott, Mary S. Burdick, Rose M. Ochi, Joel Edelman, David A. Binder, Harold W. Horowitz, Michael H. Shapiro, Los Angeles, Jerome Levine, Beverly Hills and Robert F. Knox, San Francisco, for plaintiffs and respondents.

Thomas M. Griffin, Sacramento, Stephen D. Sugarman, Robert H. Mnookin, John E. Coons, Berkeley, Ernest L. Aubry, John R. Phillips, Carlyle W. Hall, Jr., Brent N. Rushforth, Fredric P. Sutherland, A. Thomas Hunt, Los Angeles, and Timothy B. Flynn, Pacific Palisades, as amici curiae on behalf of plaintiffs and respondents.

Levy, Koszdin & Woods and Henry R. Fenton, Los Angeles, for intervener and respondent.

Kronick, Moskovitz, Tiedemann & Girard, Edward J. Tiedemann, Sacramento, and Mark Paul, Los Angeles, as amici curiae.

SULLIVAN, Justice.

The instant proceeding, which involves a constitutional challenge to the California public school financing system, is before us for the second time. In 1971, we reversed a judgment of dismissal entered upon orders sustaining general demurrers and remanded the cause with directions that it proceed to trial. (Serrano v. Priest (1971) 5 Cal.3d 584, 96 Cal.Rptr. 601, 487 P.2d 1241, hereafter cited as Serrano I.) In so doing we held that the facts alleged in plaintiffs' complaint were sufficient to constitute the three causes of action there set forth, and that if such allegations were sustained at trial, the state public school financing system must be declared invalid as in violation of state and federal constitutional provisions guaranteeing the equal protection of the laws. 1 Upon remand answers to the complaint were filed by all existing defendants 2 and certain school districts of the County of Los Angeles were allowed to intervene as defendants, adopting as their own the answers previously filed by the other county defendants. 3 The California Federation of Teachers, AFL-CIO, was permitted to intervene as a plaintiff on condition that its complaint adopt the essential allegations of the original complaint. The trial court declined to accept defendants' suggestion that the Legislature and the Governor be joined as indispensable parties.

Trial commenced on December 26, 1972. After more than 60 days of trial proceedings the court issued its 'Memorandum Opinion Re Intended Decision' on April 10, 1974, and on August 30 of the same year filed its findings of fact and conclusions of law, there being 299 of the former and 128 of the latter. Judgment was entered on September 3, 1974, and defendants' motion for a new trial was denied on October 28, 1974. This appeal followed. 4


Our decision in Serrano I, which due to the then legal posture of the proceeding directed itself only to the sufficiency of allegations of the complaint to state a cause of action and contemplated full trial proceedings for the proof of such allegations, nevertheless attracted the immediate attention of the California Legislature. As a result the lawmakers passed two bills--Senate Bill No. 90 (S.B. 90) and Assembly Bill No. 1267 (A.B. 1267)--which, upon becoming law during the pendency of trial proceedings, brought about certain significant changes in the public school financing system then under judicial scrutiny. Recognizing this, all parties to the action thereupon entered into a stipulation that for purposes of trial the California system for the financing of public schools should be deemed to include all law applicable at the time of trial. This agreement was later incorporated as follows among the trial court's conclusions of law: 'For purposes of this litigation, the California system of financing public schools, includes not only all pertinent provisions of the California Constitution, statutes, and administrative codes, and all pertinent provisions of federal statutes and regulations, but includes all modifications, amendments, and additions In view of these developments we think it appropriate at this point, before undertaking a description of the particulars of the trial court's judgment, to review in some detail the specific nature of the changes in the financing system which were wrought by the Legislature following our decision. 5 Because our understanding of these changes depends in large part on an understanding of the system as it existed at the time of Serrano I, we begin by reiterating the description of that system, based on the allegations of the complaint and certain matters judicially noticed, which we set forth in our earlier opinion. Clarity of exposition dictates that the following excerpt be extensive. 6

to the California statutes and [18 Cal.3d 737] administrative codes resulting from the California Legislature's enactment of those bills known as S.B. 90 and A.B. 1267.' (See Stats.1972, ch. 1406; Stats.1973, ch. 208.)

A. The System Prior to S.B. 90 and A.B. 1267

In Serrano, I, we described the prior financing system as follows:

'We begin our task by examining the California public school financing system which is the focal point of the complaint's allegations. At the threshold we find a fundamental statistic--over 90 percent of our public school funds derive from two basic sources: (a) local district taxes on real property and (b) aid from the State School Fund. 7

'By far the major source of school revenue is the local real property tax. Pursuant to article IX, section 6 of the California Constitution, the Legislature has authorized the governing body of each county, and city and county, to levy taxes on the real property within a school district at a rate necessary to meet the district's annual education budget. (Ed.Code, § 20701 et seq.) The amount of revenue which a district can raise in this manner thus depends largely on its tax base--i.e., the assessed valuation of real property within its borders. Tax bases very widely throughout the state; in 1969--1970, for example, the assessed valuation per unit of average daily attendance of elementary school children 8 ranged from a low of $103 to a peak of $952,156--a ratio of nearly 1 to 10,000. (Legislative Analyst, Public School Finance, Part V, Current Issues in Educational Finance (1971) p. 7.) 9 'The other factor determining local school revenue is the rate of taxation within the district. Although the Legislature has placed ceilings on permissible district tax rates (§ 20751 et seq.), these statutory maxima may be surpassed in a 'tax override' election if a majority of the district's voters approve a higher rate. (§ 20803 et seq.) Nearly all districts have voted to override the statutory limits. Thus the locally raised funds which constitute the largest portion of school revenue are primarily a function of the value of the realty within a particular school district, coupled with the willingness of the district's residents to tax themselves for education.

'Most of the remaining school revenue comes from the State School Fund pursuant to the 'foundation program,' through which the state undertakes to supplement local taxes in order to provide a 'minimum amount of guaranteed support to all districts . . ..' (§ 17300.) With certain minor exceptions, 10 the foundation program ensures that each school district will receive annually, from state or local funds $355 for each elementary school pupil (§§ 17656, 17660) and $488 for each high school student. (§ 17665.)

'The state contribution is supplied in two principal forms. 'Basic stated aid' consists of a flat grant to each district of $125 per pupil per year, regardless of the relative wealth of the district, (Cal.Const., art. IX, § 6, par. 4; Ed.Code, §§ 17751, 17801.) 'Equalization aid' is distribution in inverse proportion to the wealth of the district.

'To compute the amount of equalization aid to which a district is entitled, the State Superintendent of Public Instruction first determines how much local property tax revenue would be generated if the district were to levy a hypothetical tax at a rate of $1 on each $100 of assessed valuation in elementary school districts and $.80 per $100 in high school districts. 11 (§ 17702.) To that figure, he adds the $125 per pupil basic aid grant. If the sum of those two amounts is less than the foundation program minimum for that district, the state contributes the difference. (§§ 17901, 17902.) Thus, equalization funds guarantee to the poorer districts a basic minimum revenue, while wealthier districts are ineligible for such assistance.

'An additional state program of 'supplemental aid' is available to subsidize particularly poor school districts which are willing to make an extra local tax effort. An elementary district with an assessed valuation of $12,500 or less per pupil may obtain up to $125 more for each child if it sets its local tax rate above a certain statutory level. A high school district whose assessed valuation does not exceed $24,500 per pupil is eligible for a supplement of up to $72 per child if its local tax is sufficiently high. (§§ 17920--17926.) 12

                [557 P.2d 934] 'Although equalization aid and supplemental aid

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